Last week in “Scripture’s View on Human Value”, we explored what the Bible has to tell us about the worth of each of us as individuals. With this in mind, it might seem reasonable that a society which recognizes this worth would ensure that every individual received an equal share of the wealth.

Unfortunately, as those who have lived and died in communist countries may attest, such generosity is possible only in a society in which every individual is altruistically dedicated to the greater good. In reality, such “equal” distribution tends to promote both corruption and a decrease in productivity. After all, why should I work extra hard so that the person who sits around doing nothing can feed his family? Instead, many nations have opted for the “fair” system known as capitalism: each individual is free to make as much money as is possible provided that they “color within the lines” of the democratically determined laws.

Our goal here, of course, isn’t to debate the relative value of communist/capitalist systems, but to provide an introduction to the free market economy which drives the latter. An understanding of this economy is essential if we’re to comprehend why our pay doesn’t reflect the constitutional principle that “all men are created equal”. Or why our seemingly “upside down” society in which those who appear to do very little often earn more than those who do much may not be so upside down after all.

This understanding begins with the law of supply and demand. Put simply, this law states that the scarcer a resource is, the higher the price it demands. There aren’t a large number of people in our country (or throughout the world, relatively speaking) who are qualified physicians or certified engineers. The result is that the price for those services and the salary of the individuals who provide them is high. There are, however, millions of people capable of hauling carts out of the local Walmart parking lot. Greater availability = lower demand price.

Whether you own a small Mom and Pop store or a publicly traded company, your goal as the business owner is to maximize profit… and one of the ways this is accomplished is through minimizing expenses. But is it fair to minimize expenses by depriving others of a higher wage? We’ll take a closer look at the answer to this question next week. Meanwhile, feel free to share your own thoughts on the law of supply and demand in the comment box below!